Facebook's drop is California's too

Bloomberg

Updated 7:59 pm, Thursday, August 2, 2012

Photo: Spencer Platt, Getty Images

Image 1of/1

Caption

Close

Image 1 of 1

FILE - JULY 26: Facebook has announced it's first earnings as a public company on July 26, 2012 in New York City. Revenue beat Wall Street expectations although shares fell 2.4 percent to $26.19, 29 percent down from it's IPO. Advertising revenue went up 28 percent to %992 million with costs and expensese rising to $1.93 million.
.
. NEW YORK, NY - MAY 18: The Nasdaq board in Times Square advertises Facebook which is set to debut on the Nasdaq Stock Market today on May 18, 2012 in New York, United States. The social network site is set to begin trading at roughly 11:00 a.m. ET and on Thursday priced 421 million shares at $38 each. Facebook, a Menlo Park, California based company, will have a valuation exceeding $100 billion. less

FILE - JULY 26: Facebook has announced it's first earnings as a public company on July 26, 2012 in New York City. Revenue beat Wall Street expectations although shares fell 2.4 percent to $26.19, 29 percent ... more

The owner of the world's largest online social network, touched $19.82 Thursday, the lowest price since the Menlo Park, Calif.-based company first offered shares to the public at $38 on May 17.

The most populous U.S. state's $91.3 billion budget, signed by Gov. Jerry Brown in June, counted on $1.9 billion in income-tax revenue from company insiders such as Chief Executive Officer Mark Zuckerberg exercising options, assuming an average price of $35. Facebook, which touched $45 May 18, has averaged $29.49 on the Nasdaq stock market.

“Facebook share prices have fallen far below levels assumed in the state's revenue projections,” the nonpartisan Legislative Analyst's Office said this week in a report. If “the lower share prices persist through November and December, hundreds of millions of dollars of income-tax revenue assumed in the state budget plan are at risk.”

Ashley Zandy, a Facebook spokeswoman, said the company didn't have a comment. Executives and investors were expected to sell 157.4 million shares in the initial public offering, according to a regulatory filing.

Facebook, which hasn't closed above the $38 IPO price since May 18, its first day of trading, last week said second-quarter sales growth was 32 percent from the same period a year earlier, down from 45 percent in the previous three months. The company still needs to prove to investors that it can profit from the growing number of users who access the site on mobile devices, said Tom Forte, an analyst at Telsey Advisory Group in New York.

Most Popular

Zynga Inc., an online-game developer based in San Francisco, went public in December and has declined from a $15.91 high on March 2 to as low as $2.68 Thursday, a record.

A Zynga investor sued the company and the IPO underwriters this week, claiming shareholders were misled about its financial health. The company reported lower-than-expected second-quarter earnings July 25, and fell 37 percent the next day.

California finance officials typically update revenue estimates when presenting the governor's proposed budget in January. New information on Facebook probably will be used in that update, according to the Legislative Analyst's Office.

California, the world's ninth-biggest economy, took in $7.2 billion from income taxes in April.